Tax Type
Retail Sales and Use Tax
Description
Prescription medicines, drugs and medical aids.
Topic
Taxpayers' Remedies
Date Issued
02-22-1985
- February 22, 1985
RE: §58.1-1821 Application/Sales and Use Tax
Dear ****
This will reply to your letter of June 26, 1984 in which you submit an application for correction of sales and use tax assessed to ***** as the result of an audit.
FACTS
***** (hereinafter "Taxpayer") is engaged in the sale of medical oxygen and the sale and lease of durable medical equipment and supplies pursuant to physician's prescriptions. Recent audits of the taxpayer revealed the failure to collect the sales tax on such transactions. The taxpayer contests these assessments, contending that the items included in the audits were exempt from the sales and use tax under the provisions of Virginia Code Sections 58-441.6(s) and (sl).
DETERMINATION
During the instant audit period, Section 58-441.6(s) of the Code of Virginia (recodified as Virginia Code Section 58.1-608.21 effective January 1, 1985) provided a sales and use tax exemption for the following items of tangible personal property:
Medicines, drugs, hypodermic syringes, artificial eyes, contact lenses, eyeglasses and hearing aids dispensed by or sold on prescriptions or work orders of licensed physicians, dentists, optometrists, ophthalmologists, opticians, audiologists, hearing aid dealers and fitters, and controlled drugs purchased by a licensed physician for use in his professional practice.
Additionally, Virginia Code Section 58-441.6(sl) (now Virginia Code Section 58.1-608.22) provided a similar exemption for the following items during the audit period in question:
Wheelchairs and parts therefor, braces, crutches, prosthetic devices, orthopedic appliances, catheters, urinary accessories, insulin and insulin syringes, when purchased by or on behalf of an individual for use by such individual.
It is asserted that the items included in the department's audits of the taxpayer were exempt from the tax under the statutes above. Those items include oxygen concentrators, IPPB machines, regulators, beds, bed rails, commodes, and other items of durable medical equipment. While the items included in the taxpayer's audits were dispensed under the prescriptions of physicians, they were not among the items exempted from the sales and use tax under Virginia Code Sections 58-441.6(s) and (sl).
During the audit period in question, Virginia Code Sections 58-441.6(s) and (sl) clearly exempted from tax prescription "medicines" and "drugs" as well as many specific items. Traditionally, the department has deemed medical oxygen prescribed by a physician to be exempt from tax as a "medicine" or "drug"; however, oxygen equipment and cylinders have been deemed subject to tax when rented or sold separately from oxygen. This position was predicated upon the fact that such cylinders and equipment were not medicines or drugs, nor were they among the other items specifically exempted from tax until July 1, 1984. Similarly, items such as commode chairs and special use beds were deemed taxable until July 1, 1984 inasmuch as such items were not among those specifically exempted from tax under Virginia Code Sections 58-441.6(s) and (sl).
This was the consistent position of the department since the inception of the sales and use tax and was based upon two premises of case law. First, a statute that is plain upon its face should be taken at face value, 17 Mich Jur 316 and second, statutes granting tax exemptions are construed strictly against the taxpayer. Commonwealth v. Community Motor Bus Company, 214 Va. 1;5, 198 S.E. 2d 619 (1973).
It should be noted that most, if not all of the items included in these audits are presently exempt from the tax under a 1984 legislative amendment to Virginia Code Section 58-441.6(sl). However, as the amendment, providing an exemption for "durable medical equipment and devices, and related parts and supplies designed for those products...when...purchased by or on behalf of an individual for use by such individual," took effect on July 1, 1984 and was not retroactive, it will have no impact on these audit assessments. I have enclosed a copy of Section 630-10-65 of the Virginia Retail Sales and Use Tax Regulations which describes the new statutory exemption for durable medical equipment.
While I feel that the law was clear on the taxability of most items of durable medical equipment during the instant audit period, I do find basis for the relief of tax assessed to the taxpayer involving sales and leases of oxygen concentrators. I find basis for the removal of such items from the audit assessment since a large segment of the Virginia durable medical equipment industry has apparently been relying on an unofficial 1978 ruling from the department in which oxygen concentrators were deemed exempt from the sales and use tax.
The assessment issued to the taxpayer will be revised as noted in the foregoing paragraph, with the tax liability incurred on all items except oxygen concentrators remaining due and payable. Please advise if you wish to set up a meeting to discuss my determination in this matter.
Sincerely,
W. H. Forst
Tax Commissioner
Rulings of the Tax Commissioner